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White House Officials See More Labor Market Slack Than Fed Does

(Bloomberg) -- Many Federal Reserve policy makers believe the U.S. has achieved full employment. White House officials aren’t so sure.

Kevin Hassett, chairman of President Donald Trump’s Council of Economic Advisers, said joblessness below 4 percent may be equivalent to full employment now.

That’s well shy of the 4.5 percent estimate of the Fed, based on the median projection of policy makers released in March, and compares with last month’s U.S. jobless rate of 4.1 percent.

“I’m not sure full employment is one number,” Hassett told a conference sponsored by the Institute of International Finance on Thursday in Washington, adding, “I think it could be in the 3’s now.”

The White House still thinks there’s room to run in the labor market, said Mark Calabria, Vice President Mike Pence’s chief economist.

There is “obviously a very vigorous debate about -- are we at full employment? Is there room for the labor market to grow?,” Calabria told the Global Finance Forum in Washington. “It is certainly our belief that there are a tremendous amount of people on the sidelines, for a variety of reasons.”

Fed Chairman Jerome Powell has been cautious about declaring that the U.S. has achieved full employment.

While many labor market indicators suggest the economy is in that “neighborhood,” a few others suggest that some slack remains, he said in an April 6 speech in Chicago.

“Assessments of the maximum level of employment are uncertain,” the Fed chief said.

Fed policy makers do see unemployment falling further in coming months, to 3.8 percent at the end of this year and 3.6 percent at the end of 2019, according to their median forecast released in March.